The Investors Next Door

Trying to figure out the best movesin today's market? Listen to the strategies from members of some of the nation's leading investment clubs.

know that this [bear market] is a test.

BERNADETTE JOHNSON: Our financial commitment has held up very well. We’ve been blessed that our partners’ job situations have been fairly stable throughout this period. As far as financial commitment, we’ve kept our minimum fairly low to $35 a month plus some dues and fees to take care of incidentals, mailings, [etc.]. We did not want the club to be another wolf at the door.

But also there is a commitment to the club so if someone were to lose a job or hit a tough spot, and were not able to meet our financial commitment, we would [first] ask that she let the president know. Second, [we ask members to] maintain the rest of their commitment to the organization [by] following their stock and helping the club in other ways because this is a long-term commitment for us. We wouldn’t say, ‘Well, you missed three payments so you’re out.’ We would work with [the individual to create] something that is workable for the long haul.

BAUNITA GREER: We have seven members and haven’t lost any. We recently had a meeting. Our group is comprised of one very conservative person, two very aggressive people, and everyone else in the middle. We do quarterly reviews of our portfolio. [Right now] we see buying opportunities. We’re re-evaluating a lot of stocks that [sold at] premiums before to see if this is the opportunity for us to get in.

CLARK GRAIN: Well, we haven’t lost any enthusiasm. In fact, we’ve added a new member during this market fluctuation. We have 16 [members] now. Everyone was a highflier during the mid-90s. We made one fundamental mistake, [though]. We did not pay attention to the charts. We’ve lost about 30% of our value. We could have probably lessened that to 10% or 15% had we paid attention to the charts. The one lesson we learned [is that] there is a time to sell–even with your favorite stock, the one that has been making beaucoup money for you. In the past, we have held no more than 1% cash. All of [our portfolio] had been in equities. These days, we have 35% of [it] in cash. We’re just waiting for the right moment to pounce on a stock that we think is going to appreciate. And we’ve actually made some purchases and have done reasonably well, but we are very, very careful now. It may take two or three meetings to even think about buying a stock. But that means that everyone has done a lot of work.
B.E.: Has your club changed its investment strategy or philosophy in this environment?

GRAIN: We’re looking at more data. For example, we recently focused on the cash flow statement [and it] helped us get out of some really bad stocks. [One example is] AOL Time Warner (NYSE: AOL). After they bought Time Warner, which was probably the dumbest move that any company could have made, we began to look at their cash flow statements and

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